Today’s topic will probably be a touchy one and it’s all about whether or not parents should start (or end) saving for children’s college expenses. Ever since I paid off my $38,000 worth of student loans last year, I have received many e-mails from parents who are interested in seeking help for their children.
These e-mails are all related to whether or not parents should risk or sometimes even ruin their retirement by helping their child pay for college.
There is usually one common theme in these e-mails – the parents are usually not on track for retirement, they have debt, or they cannot afford to help their child in college.
Here are some of the stories I have heard in these emails:
- The parents have over $100,000 in student loans that they took out in THEIR name so their child could go to school. These parents are not on track for retirement and they have a lot of other debt besides student loans.
- Their child is in medical school and the parents are paying for all of their college expenses plus food, car, rent, etc. These parents are not on track for retirement and they have debt.
- Their child is in law school and the child said that if his/her parents don’t continue paying for their expenses, that they would hate their parents. This child was even more mad when the parents printed out every single blog post of mine and gave it to them (I did not tell their parents to do that, it was entirely their idea). The child said I was ruining his/her life (yup, that actually happened). These parents are not on track for retirement and they are afraid of losing their child now as well.
I know I’m not a parent.
I’m not a parenting or child expert either.
I know I don’t know what it is like to have a child and the feelings that go along with that. However, I do know that I raised my younger sister after my father passed away and her attending college did make me want to help her so that she wouldn’t have to worry about money as much.
The other day I was talking to my sister and she was bringing up different ways she could possibly side hustle so that she could make extra money. It sort of made me feel bad, and for a moment I thought about helping her financially. Luckily, she snapped me out of it and told “You’ve helped me enough already. Do not worry.”
Her saying that really made me happy. I actually had tears in my eyes!
Instead of just giving her money, I helped her with her budget, I have supported her, I helped her find side hustles so that she could make extra money, I helped her make a plan, and more.
I know all of these other things I am doing have shaped her into an awesome young lady. Yes, she has to learn things the hard way but in the end she will be just fine.
@SenseofCents Good question! As a CFP, I say no. You can get a loan for college but you can’t get one for retirement!
— Shannah Game (@ProfShannah) September 27, 2014
@SenseofCents No. Akin to ‘put your oxygen mask on first before helping others’ on planes. — BidAskDividends (@BidAskDividends) September 27, 2014
@SenseofCents they shouldn’t risk their retirement but If they are in a position to help they should. I couldn’t have done it on my own. — Erica (@raerica) September 27, 2014
Alarming information about student loans.
According to the Federal Education Budget Project, around $100 billion was borrowed by students in fiscal 2014 alone. Also, the default rate on student loan debt averages around 13% to 14%. 90% of student loans in recent years are co-signed by others (mostly parents), and that is a big burden falling on parents.
That’s a lot of debt, and that’s a lot of debt that isn’t being paid for. If you are a parent cosigning on student loan debt, I hope you understand the consequences that can come from it.
Should parents help their children go to college?
Okay, before anyone thinks this is a post bashing all parents who help their children, I should say that I have no problem with parents helping their children pay to go to college. However, that’s AS LONG AS THE PARENTS CAN AFFORD IT.
I have plenty of friends who went to college where a lot of it was paid for by their parents. These parents could afford it, and that is key. If you are on track for retirement, you are not struggling, and so on, and you want to help your children attend college, then by all means go for it.
I also have plenty of friends who went to college where everything was paid for yet their parents clearly could not afford it. Some of these parents took on a second or even a third job so that their child could go to school. They racked up credit card debt and student loan debt as well. Some of these students never paid a cent towards their student loans and their parents were forced to in the end. They risked their retirements, their happiness and more. While I understand that these parents care for their children, they need to realize they are putting their retirements at risk.
Like Shannah said above in the tweet, you can take out loans for student loans, but you can’t for retirement.
When we have children, as long as we are on track for retirement then we will most likely help our children attend and afford college.
I know that my story is not the average story, but I went to college with no help at all. I paid for all three of my degrees on my own, lived on my own, worked full-time, paid for all of my food, and more, all starting just days after I turned 18 and graduated from high school.
It was tough, but I do think it is possible.
For other students, it may take longer to graduate, or it may take less, they may take on more debt, or they may take on less. Everyone’s story is different, but it does not mean it is not possible.
One great story I recently read was How I Graduated College With $100k… in Savings on Budgets Are Sexy. Many say my story is impossible, but just wait until you read this great story. You will be amazed at how awesome Will is! I’m jealous but I know he worked hard for his accomplishments.
How can parents help but not risk their retirement?
Instead of risking your retirement, you can do other things to help your child go to college. Below are some of my tips if you have children who are about to attend college:
You don’t need to help in every way possible. For some reason, there is this myth out there that helping your child go to college means you need to pay for everything for them. Instead of paying for their tuition, textbooks, food, dorm, car, and everything else, set limits. You might help by giving them emotional support, letting them stay in your home while they are in college, helping them find ways to save money for college, helping them cut their college expenses, and more.
Help them get a job. If you don’t have the money to help your child, you may want to help them find a job. This way they can pay for their own expenses. Just a little bit can go a long way.
Help them create a budget. If your child doesn’t have a budget, help them create one now. Read Does your budget suck? – Budget Categories. A budget can go a long way and help someone overcome many financial difficulties.
There are quite a few questions for you today, because I think this topic is an interesting one. I know that not everyone will have the same opinion so I want everyone to chime in! 🙂
Do you think parents should risk their retirement and pay for college? What if the parents are on track for retirement? How much should they help, if anything at all? Will you help your children go to college?
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I was lucky enough to have parents who could afford to pay for college and part of my graduate school, so that does create more of a sense of obligation for me. However, I DO NOT think parents should ever risk their retirement to pay for a child’s college education. In addition to the sentiments expressed in the tweets above, I think it’s important for parents to remember that they’ll probably end up leaning on their children later, if they don’t have enough funds to pay for retirement.So helping them pay for college, could mean making their finances more difficult later on.
We will help our daughter pay for college if we can, but I’ll expect her to contribute as well. For example, she’ll have to have summer jobs to pay so she can pay for non-essentials.
My instinct is that all parents who are in a position to do so should pay for college for their kids if they can, but relationships can be complex, and I don’t believe there’s a one-size-fits-all answer to this question.
Yes, there’s definitely not a one-size fits all answer. It can be tough!
Very interesting topic! In general I do not think parents should risk their retirement. That being said, my husband and I both grew up in very traditional Asian households. My parents paid for my college education, but I took out loans for grad school. My husband’s parents helped him through college and med school. In return it is pretty much expected that we will help them through retirement. Our parents do the same for our grandparents. I guess you can say it’s tradition!
That’s awesome! 🙂
I like your ideas on this. You can see how if you make it too easy on a kid, they get that entitlement mentality. I’d want to help some, but I wouldn’t put hubby and me into debt to send him to college. He could live at home rent and board free. The one thing I’ll never understand is when parents go into debt to pay for their kid’s wedding. To me, that is just bizarre. I’d hand him a ladder for the elopement and a toaster for their first at-home breakfast. If the girl’s parents want to break their piggy banks, all power to ’em!
I’ll never understand going into debt for a wedding either!
Thanks Marty! I definitely think parents should have a plan.
Definitely sounds like your parents did it the correct way. Good job to all of you!
Oh my gosh. The mad kid that said you were ruining his life? That’s awful!!!! (That the kid is that entitled and stupid; the fact he thinks you’re ruining his life is hilarious.)
You can’t pay for the education of your kids if you don’t have money for yourself. Sure, they may plan to provide for you in your old age, but a car accident can change all of that in an instant.
Haha yeah I had to laugh to. This was a GROWN adult who said this as well.
I actually fear not being able to help my children with college. I’ve seen what it’s like for parents to not give a dime to their children’s college education and it’s not pretty. I plan on funding 50% of their college education, but only if I’m on track for retirement. Like pretty much every finance expert out there, you should save for retirement first before helping your kid through school.
Yes, I would like to help my children out with college as well. I do think it’s possible, but it can be difficult. I’m the only one out of anyone I know personally who didn’t receive any help, and at times I do get jealous of my friends who received help.
This is a touchy subject. For me, I would rather have retirement money than help my kids through college. My rationale is this: if I go into debt for helping my kids through college, chances are that I am going to need to rely on them for financial support. This will put more stress on them and their family than if they had taken out student loans and paid them off.
I agree! Thanks Jon.
They’re be fine! It’s definitely possible to go to school on your own or with it being partially covered. It also helps children learn more about the real world and have a say in their finances.
We will not risk our retirement for our kids’ college education but we sure do hope to pay as much as we can! Unfortunately, it is coming up in just a few short years and we have not saved for it. Ugh!
Good luck! There are many ways to go to college for cheap, so I am sure they will be fine 🙂
Thank you for the encouragement! I’ll be watching your blog to learn some tips:)
Thanks! I’ll be reading your blog as well 🙂
I agree. Students can go to school for much cheaper than what it seems like most are choosing these days.
Oh my god that sounds horrible!
I’m a parent (albeit to a 1 1/2 year old so college is a long way off) and I can definitively say that we will not be risking our retirement to fund her college education! Retirement contributions come first, although we are also putting some money into savings for her as well. Honestly, I think I valued my education more because I earned it. I got a full scholarship that covered tuition and house for undergrad, and I took out a small amount of loans to cover grad school. My parents paid for my meal plans and some of my textbooks for undergrad, but the rest of it I earned through scholarships or paid for myself.
I think a big reason I was so motivated was because my parents were very up front with me. I had about $20k in savings bonds that I had received as gifts throughout my childhood, but beyond that I would be on my own. Since I knew this, I worked extra hard to do well in high school so I could earn that scholarship, and I knew I had to do well in college to keep it. Having some skin in the game was a great motivator. I wound up not needing that $20k for my education, and instead used it as a downpayment for a house.
I hope to be able to help my daughter out a bit with college expenses, but I feel no obligation to pay for it all. I feel that the best gift I can give her is her parents’ financial independence in our old age.
Yes, I think those who pay their own way or work their own way towards scholarships definitely are very motivated to succeed and find the best value in the college they choose. Good job!
I get very nervous when parents put themselves in a bad position to help their children. Is it really help when they endanger their retirement and then the children have to help them beyond what they may be capable of doing or prepared to do. Also, the child needs to rethink their school if it’s going to cost that much.
I agree. There are plenty of affordable ways to attend college!
I love this post. I totally agree with you and I also think it’s ridiculous how much pressure parents put on themselves to pay for their kids’ tuition. I hear coworkers talking all the time about how they can’t afford to do this or that right now because they are paying for their kids to go to college. I think that’s craziness! I think student loans teach kids responsibility – otherwise if your parents pay for your college, what reason do you have to go out and get a job immediately after college? Paying off a loan also teaches people a bit about budgeting, and about dealing with loan companies, etc.I remember my mom helped me get loans but had me call Sallie Mae to sort out any account issues, etc – it is good to learn all those terms and definitions and get experience with dealing with grown up responsibilities.
If you have the money to pay for your kid’s tuition without ruining your retirement, going into debt, or cutting out all fun from your life, then by all means do so, but never at the cost of your own retirement fund or lifestyle!
I agree. Thanks for stopping by! 🙂